New IRS reporting for 2021? 8 8

[fantastic_four]

I found myself being surprised that this thread has become about how to evade paying income tax on collectibles sales without the IRS knowing it, but then I re-read the title and realized oops, I guess it was about that from the start.  

Edited April 18, 2021 by fantastic_four

[Vince G]

15 minutes ago, fantastic_four said:

I found myself being surprised that this thread has become about how to evade paying income tax on collectibles sales without the IRS knowing it, but then I re-read the title and realized oops, I guess it was about that from the start.  

Definitely not the point I am trying to make or infer.  i have been reporting since I've been selling.  Just relaying what I've been told by a licensed tax preparer.  I certainly understand the issues many of our fellow collectors face, particularly those who do a ton of buying and selling.  It's not easy to try to remember what you paid for a book months or years ago or even when you made those purchases without having detailed records.  Bottom line, it's technically sale of goods or services on the 1040 so it should be reported.

[WolverineX]

So here's a question I have been wondering.... lets say you buy a Hulk 181 a few years ago  for 3k at a convention for cash and lets say in a few years from now , you sell it for 7k.  That's a 4k profit.  But what if you don't have any sort of documentation from 3 years ago that you paid 3k ....   Are you then pretty much taxed the full 7k and only can deduct cover price of 35 cents?    Obviously, from now one I will save receipts fastidiously in an app but what do you do about your books you bought retroactively? 

[Vince G]

Just now, Wolverinex said:

So here's a question I have been wondering.... lets say you buy a Hulk 181 a few years ago  for 3k at a convention for cash and lets say in a few years from now , you sell it for 7k.  That's a 4k profit.  But what if you don't have any sort of documentation from 3 years ago that you paid 3k ....   Are you then pretty much taxed the full 7k and only can deduct cover price of 35 cents?    Obviously, from now one I will save receipts fastidiously in an app but what do you do about your books you bought retroactively? 

No.  You report the profit on the form/schedule.  This is a similar scenario to mine that resulted in an over 10k sale.  Purchased for X, sold for Y, report Z as profit specifying 'sale of comic book' on the form.  In my case, it was a private buy/sell and I had receipts for both.  I showed my preparer my original buy receipt and my sale receipt.  Those receipts did not need to be attached to the schedule/return but I must keep those in the event the IRS has questions, which is unlikely, but is possible.  Perfectly legit and accepted as such by the IRS.  Like I said, I've been reporting for the last 5 years so this is how it's done in those situations.  In your example, your 4k profit is taxed at the long term capital gain rate of 15% because it is an investment that you've held for more than 1 year.

[WolverineX]

2 minutes ago, Vince G said:

No.  You report the profit on the form/schedule.  This is a similar scenario to mine that resulted in an over 10k sale.  Purchased for X, sold for Y, report Z as profit specifying 'sale of comic book' on the form.  In my case, it was a private buy/sell and I had receipts for both.  I showed my preparer my original buy receipt and my sale receipt.  Those receipts did not need to be attached to the schedule/return but I must keep those in the event the IRS has questions, which is unlikely, but is possible.  Perfectly legit and accepted as such by the IRS.  Like I said, I've been reporting for the last 5 years so this is how it's done in those situations.  In your example, your 4k profit is taxed at the long term capital gain rate of 15% because it is an investment that you've held for more than 1 year.

Okay good.  I will be collecting receipts obsessively from now on, but was really worried I would get dinged the 7k which will make me not want to ever buy books ever again.  

[Vince G]

2 minutes ago, Wolverinex said:

Okay good.  I will be collecting receipts obsessively from now on, but was really worried I would get dinged the 7k which will make me not want to ever buy books ever again.  

You won't.  And even if you did, you could fight that.  I know this discussion is centered on our hobby but realistically, the issue is all-encompassing.  Think about how many people sell things on ebay, etsy, etc. that they have just lying around the house like old hardware, video cameras, furniture, etc..  These days, it's almost everybody.  I have no idea how this will all play out in time but I suspect there will be some public blow-back once people start receiving those 1099s.  If anything, it'll just give the IRS and tax preparers many more headaches to deal with in 2022, not to mention those of us who do a lot of buying and selling who need to start keeping records of every transaction.

[OuterBanks]

10 minutes ago, Vince G said:

Like I said, I've been reporting for the last 5 years so this is how it's done in those situations.  In your example, your 4k profit is taxed at the long term capital gain rate of 15% because it is an investment that you've held for more than 1 year.

 

28% and 31% if your overall income is higher than 200K.  Collectibles are taxed higher because the government views art, gold, stamps, coins, comics etc. as a worthless form of investment.  I think the IRS should give hobbyists a pass and say it’s a $20k cut off.  If you’re making more than 20K in profit a year - you need to incorporate or work as a 1099 and deal with capital gains.   Most of us are just pouring our profits back into the hobby anyway.  It’s not really like a tax dodge.

[Vince G]

45 minutes ago, VikramK said:

 

28% and 31% if your overall income is higher than 200K.  Collectibles are taxed higher because the government views art, gold, stamps, coins, comics etc. as a worthless form of investment.  I think the IRS should give hobbyists a pass and say it’s a $20k cut off.  If you’re making more than 20K in profit a year - you need to incorporate or work as a 1099 and deal with capital gains.   Most of us are just pouring our profits back into the hobby anyway.  It’s not really like a tax dodge.

FYI, collectibles are considered other income but are technically treated the same as investment income.  You’re either paying taxes at the short term gain or long term gain rate pending on how long you’ve held the investment

[WEBHEAD]

Ditto   for those who are under 45K  leave us alone with our books from childhood at 10 cents

 

Edited April 19, 2021 by WEBHEAD

[shadroch]

If you bought a book at a convention four years ago for $3,000 and sold it yesterday for $7,000, you do not have a $4,000 profit. Understanding that is an all important first step.

[Vince G]

47 minutes ago, shadroch said:

If you bought a book at a convention four years ago for $3,000 and sold it yesterday for $7,000, you do not have a $4,000 profit. Understanding that is an all important first step.

Would you care to explain/detail the rationale?  Trying to understand your statement.

[shadroch]

1 minute ago, Vince G said:

Would you care to explain/detail the rationale?  Trying to understand your statement.

You had expenses connected to buying the book. Did you drive to the show? Did you pay admission? Did you have lunch at the show? Did you leave it in the same bag and board it was in when you bought it? Did you store the book? Was the book insured? Did you pay a commission to sell the book? Did you pay paypal fees? Did you drive to the post office to mail the book? All of these are reasonable expenses one can deduct from the sale price when you determine your profit.  There are many others, as well.

[pemart1966]

On 4/18/2021 at 10:44 AM, Vince G said:

No.  You report the profit on the form/schedule.  This is a similar scenario to mine that resulted in an over 10k sale.  Purchased for X, sold for Y, report Z as profit specifying 'sale of comic book' on the form.  In my case, it was a private buy/sell and I had receipts for both.  I showed my preparer my original buy receipt and my sale receipt.  Those receipts did not need to be attached to the schedule/return but I must keep those in the event the IRS has questions, which is unlikely, but is possible.  Perfectly legit and accepted as such by the IRS.  Like I said, I've been reporting for the last 5 years so this is how it's done in those situations.  In your example, your 4k profit is taxed at the long term capital gain rate of 15% because it is an investment that you've held for more than 1 year.

You had both "buy" and "sell" receipts.  The OP did NOT have a buy receipt but had a "sell" receipt.  His scenario is far different from yours.  How can he put down any "buy" number except "cover price" and justify it if audited??

Edited April 19, 2021 by pemart1966

[Vince G]

1 minute ago, shadroch said:

You had expenses connected to buying the book. Did you drive to the show? Did you pay admission? Did you have lunch at the show? Did you leave it in the same bag and board it was in when you bought it? Did you store the book? Was the book insured? Did you pay a commission to sell the book? Did you pay paypal fees? Did you drive to the post office to mail the book? All of these are reasonable expenses one can deduct from the sale price when you determine your profit.  There are many others, as well.

Understood, and that's what I thought you may have been inferring in your statement.  And yes, that certainly can complicate things, particularly when attempting to show that on a tax return.  I suspect there are going to be many more questions posted here on the boards regarding this new rule as we get closer to the new year.  The can of worms has been opened

[Vince G]

4 minutes ago, pemart1966 said:

You had both "buy" and "sell" receipts.  The OP did NOT have a buy receipt but had a "sell" receipt.  His scenario is far different from yours.  How can he put down any "buy" number except "cover price" and justify it if audited??

That's a good question.  Without a buy receipt, the original sale number is in question.  I'm not sure how this is handled with respect to an audit so yes, this is a potential issue.  However, I'm going on what licensed professionals have told me and that is, as long as you're reporting an actual gain, the likelihood of an audit is very low.  The IRS understands the common taxpayer doesn't necessarily have a record of every transaction her/she has ever made, particularly going back many years when cash was the main method of exchange for goods and services, and in the event of an audit, that scenario would require a conversation with the agent inspecting the return.  As I said in my most recent reply post, the can of worms has been opened.  It will be interesting to see how this all shakes out in 2022.

[F For Fake]

On 4/18/2021 at 9:34 AM, WEBHEAD said:

well since I buy more then I sell.....let's see how all the auction sites who charge fees that are so ridiculous  I ask it again someone sends me $$$ for a book on this site.  There is no marker that it is a comic, it might be a loan from a friend, Then again I think most of those chattering are in business  You'd think that Ebay CGC Paypal would advise everyone. Except for this thread it's all I've heard/

It doesn't matter what the money was for. If you have more than 200 transactions as well as $20k in income, Paypal kicks out a 1099k. Doesn't matter what the money was for, or what venue it came from. Online payment processors have to kick out that tax form. Next year, that threshold will be $900 or $600 or whatever it is (I'm too lazy to scroll back.) And some states have already adopted it. 

[ttfitz]

On 4/18/2021 at 9:13 AM, VikramK said:

done a “reverse ROTH” (reverse ROTH means you pay ZERO taxes)

Say wha?

[ttfitz]

On 4/18/2021 at 9:34 AM, WEBHEAD said:

well since I buy more then I sell.....let's see how all the auction sites who charge fees that are so ridiculous  I ask it again someone sends me $$$ for a book on this site.  There is no marker that it is a comic, it might be a loan from a friend,

If it were a loan from a friend, you wouldn't have done a Paypal "Goods and Services" transaction, but a "Friends and Family." I'm pretty sure the upcoming statements are only for "Goods and Services."

[Callaway29]

2 hours ago, ttfitz said:

If it were a loan from a friend, you wouldn't have done a Paypal "Goods and Services" transaction, but a "Friends and Family." I'm pretty sure the upcoming statements are only for "Goods and Services."

Can confirm...

[the blob]

On 4/18/2021 at 10:05 AM, fantastic_four said:

I found myself being surprised that this thread has become about how to evade paying income tax on collectibles sales without the IRS knowing it, but then I re-read the title and realized oops, I guess it was about that from the start.  

people that actually make $150 profit a year hustling krap on ebay don't want to spend 6 hours determining their profit for the year, it isn't evil, it's just a headache, if you're selling $12K a year in stuff and likely making a profit in the 4 digits it is another issue.